Types of Superannuation Funds

What is superannuation? Well, it’s not the most riveting of conversation topics, unless you’re talking to an accountant or a financial planner. But it’s your retirement money and you simply can’t afford to take it lightly or, worse still, ignore it.

A good start to understanding superannuation in Australia is to cut through the clutter and know the basic types of funds available. It will help you choose the fund that’s right for you.

MySuper

Many super funds offer a new type of account called MySuper. MySuper will eventually replace existing default accounts offered by super funds. A default super account is one chosen by your employer if you don’t choose one yourself. MySuper accounts offer:

Lower fees (and restrictions on the type of fees you can be charged).

Simple features so you don’t pay for services you don’t need.

Single or life stage investment options.

MySuper will only be offered for accumulation funds and not for defined benefit funds. Retail, industry and corporate funds can all offer MySuper accounts. You can read more about MySuper here.

Retail funds

Retail funds are usually run by banks or investment companies. Generally, anyone can join a retail fund and they often have a large number of investment options, sometimes in the hundreds. You can either apply to join a retail fund directly, or they may be recommended by your financial adviser who may be paid for their advice by fees and/or a commission.

Most retail funds range from mid to high cost, but some are now offering a low cost or MySuper alternative. The company that owns the fund aims to retain some profit.

Industry funds

The larger industry super funds are open for anyone to join. Some others are restricted to employees in a particular industry. The main features of an industry fund are:

They usually have 5-15 investment options, which will meet most people’s needs.

Corporate funds

A corporate fund is arranged by an employer, for its employees. Some larger corporate funds are ’employer sponsored’ funds where the employer also operates the fund under a board of trustees appointed by the employer and employees.

Other corporate funds will be operated by a large retail or industry super fund (especially for small- and medium-sized employers). Features of these funds include:

Funds run by the employer or an industry fund will return all profits to members. Corporate funds run by retail companies will retain some profits.

If it is managed by a retail or industry fund it may offer a wide range of investment options.

They are generally low to mid cost funds for large employers but may be high cost for small employers.

Self-managed super funds

Do it yourself super suits some people who want the hands-on control that comes with a self-managed super fund (SMSF). Of course, with added control comes added responsibility and workload. SMSFs can be suitable for people with a lot of super and extensive skills in financial and legal matters. You must be prepared to research and track your super investments regularly if you want to manage them yourself. You can set up your own private super fund and manage it yourself, but only under strict rules regulated by the Australian Taxation Office (ATO). An SMSF can have between one to four members. Each member is a trustee (or director if there is a corporate trustee). Running your own fund is complex. You must:

Carry out the role of trustee or director, which imposes important legal duties on you

Use the money only to provide retirement benefits

Set and follow an investment strategy that ensures the fund is likely to meet your retirement needs

Keep comprehensive records and arrange an annual audit by an approved SMSF auditor

Before making a decision it is worth speaking to an Independent Financial Planner, as some professional guidance now can make a significant difference in retirement.

If you are looking to compare superannuation funds, check out the following table which contains details of the funds rated by Canstar. This table has been sorted by three-year performance (highest to lowest), and is for someone aged 30-39 with a balance of between $55-100k. Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.

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Important Information

Superannuation products displayed above that are not 'Sponsored' are sorted as referenced in the introductory text to the table. Canstar may receive a fee for referral of leads from these products. See How We Get Paid for further information. Products displayed above do not include all products/providers and may not include all features relevant to you. Please note that all information about performance returns is historical. Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall as well as rise.

Performance information shown is for historical periods up to 31/12/2018 and investment options noted in the product information. Performance figures shown reflect net investment performance, i.e. net of investment tax, investment management fees and the maximum applicable ongoing management fees and membership fees. Performance information is provided by Rainmaker Information Pty Ltd ABN 86 095 610 996 AFSL 461816 (www.rainmaker.com.au) which provides general information on superannuation. Performance data may not be available for some products. This is indicated in the tables by a note referring the user to the product provider, or by no performance information being shown.

Any advice on this page is general and has not taken into account your objectives, financial situation or needs and is not a recommendation for your particular circumstances. Consider whether this advice is right for you. Consider the product disclosure statement before making a purchase decision. You may need financial advice from a qualified adviser.

Performance, fee and other information displayed in the table has been updated from time to time since the rating date and may not reflect the products as rated. The performance and fee information shown in the table is for the investment option used by Canstar in rating of the superannuation product.

Investment returns of superannuation products: Canstar considers the annual investment returns of a product’s default investment option, including the default life-stage option where applicable. Where a product does not have a default investment option, annual returns for the investment option with the highest funds under management (FUM) and a 60-80% growth asset allocation are used.

Annual cost includes administration fees and indirect costs (including the investment fee, performance fee where applicable, and any other indirect management costs). This cost is calculated based on the super balance specified and the investment option considered in the 2018 Superannuation Star Ratings, which is the default investment option (including default life-stage options). Where a product does not have a default investment option, annual fees for the investment option with the highest FUM and a 60-80% growth asset allocation are used.

The Superannuation Star Ratings in this table were awarded in March 2018. View the Canstar Superannuation Star Ratings Methodology and Report. These results are general advice only and not personal financial advice. Ratings are only one factor to take into account when deciding whether to make an investment. Consider the Product Disclosure Statement before making a purchase decision.

Products marked as 'Sponsored' are paid advertisements and Canstar receives a fee for referring you to the advertiser. Canstar is not giving you financial advice in relation to Sponsored products.

Please note that all information about performance returns is historical. Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall as well as rise.

This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you. Consider the product disclosure statement before making a purchase decision. Canstar provides an information service. It is not a credit provider, and in giving you information about credit products Canstar is not making any suggestion or recommendation to you about a particular credit product. Statistics referenced on this page have been verified by Canstar Research. Research provided by Canstar Research AFSL and Australian Credit Licence No. 437917.